Now, in a world of frozen financial markets with justified discouragement about returns to investors in conventional venture capital models, how can needed innovations be funded in relatively mature, but suddenly stressed, industries such as plastics, electric power delivery, alternative energy, and energy delivery?
I think the answer is to form Solution Collaboratives.
A while back I blogged about Opening up Reverse Innovation in which I tried to make the case for another business model where solutions become the focus of "open collaboratives," Let's call this a solution collaborative:
Companies with a strategic interest in solving a problem or a class of problems can participate by funneling resources (money, labs, information, smart people, etc.) through the collaborative; by participating in direction; and by contact with analysis and expertise. Information from a collaborative world would logically lead to new entities which make problem-solving investment, but also could be individually exploited by strategic players.How to Organize a Solution Collaborative
A solution collaborative is created in 2 stages, just as a proprietary venture might be formed. The first stage is to collaborate in researching and analyzing the solution to a technoeconomic problem of general interest across an industry or industries. The result of this stage is a stream of information and consultations which flow back to all participants. The collaboration brings technical expertise and knowledge of market needs to bear on any feasible solutions to this need, together with actionable information for individual collaborators to pursue.
The second stage is conditional. If demanded by participants, the collaboration can even evolve to creating an organization to bring about the solution, to the mutual benefit of collaborators. Since the collaboration is organized and has access to the "best and the brightest" from everywhere, and especially benefits from having excellent feedback about market needs, a collaboration removes most of the risks which attend venture capital firms or the use of a proprietary R&D effort.
Others have talked about the anecdotal benefits of a collaboration curve. We can assure you that the benefits of collaboration are not anecdotal - but quantifiable, economic benefits.
Studies have shown that too many firms mistakenly applied an "outsourcing" mindset to collaboration efforts. This fatal mindset leads to three critical errors:
- they focus solely on lower costs, failing to consider the broader strategic role of collaboration.
- they don't organize
effectively for collaboration, believing instead that innovation could be
managed much like production and partners treated like "suppliers."
- they don't invest in building collaborative capabilities, assuming that their existing people and processes are already equipped for the challenge.
Collaboration is a new and important source of competitive advantage. Speaking from experience, one of my companies - PTAI - has been doing collaboratives among industry competitors since 1972. Back in the day, we called them "multiclient studies." We acted as if we were a corporate staff group but with better access, studied the heck out of an issue, wrote a detailed analysis and sold it to the many interested parties. Those in the plastics, automotive, paper, packaging and other industries bought them widely on a variety of technoeconomic issues.
Then, in the 1990s, PTAI innovated a method to benchmark performance among competitors in an industry, allowing any participant to quantitatively place its performance among competitors along hundreds of variables. We continue to execute this method to the advantage of hundreds of global businesses in 55 specific industries and both numbers continue to grow.
Now we're turning our attention to solution collaboratives through another one of my companies - Townsend Solutions- to address some of the most pressing problems faced by some of the mature industries.